Home buyers may be advised to wait

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Prospective home buyer Eric Brueheim and real Estate agent Julie Ann Poppi look through the kitchen window to the pool and spa in the backyard of a house for sale in Pleasant Hill, Calif. (Bob Pepping/Contra Costa Times)

WILL BIRDSEY, 34, and his wife Jennifer, 33, both from San Francisco, say they are looking for a house in the Lamorinda area, but don’t believe prices will rise in the next year.

“I’m not bullish on house prices,” said Birdsey, a commercial real estate project manager. “My wife and I believe prices will continue to decline, but we still want to look. We’re not buying this as an investment.”

Birdsey said that if his house’s value drops in the next few years, it doesn’t matter because he plans on holding the property for 20 years or more. “It’s not the end of the world,” he said. “We’re being selective and feel time is on our side.”

As prices drop and inventory and foreclosures rise in the Bay Area, many buyers feel it’s time to start looking for a bargain and hopefully their dream house.

The debut of bigger government-backed loans next month and an expected interest rate cut could even ignite home purchases, especially for those previously priced out of the housing boom.

Alexandra Whitford, 26, of Walnut Creek, recently signed the dotted line on a 1,400-square-foot, three-bed, two-and-a-half-bath home in Bay Point with her husband, Jeff, after looking over properties for two weeks.

“Two or three years ago we wouldn’t have been able to buy anything,” she said. “It’s an opportunity for the younger generation to purchase.”

The Whitfords said that with lower interest rates and prices, it seemed like a good time to buy. The couple budgeted $400,000 and started looking. Although she said she didn’t plan to buy a bank-owned home, she and her husband found one on the market for less than a week, paying $385,000 and 5 percent down after some negotiation.

“It turned out that prices were lower than we expected. … It was a nice little surprise,” she said. “A few years ago, $400,000 was the condo next to mine, a one-bedroom, 900-square-foot condo.”

While the Whitfords timing of the market was accidental, there aremany buyers trying to “time the market,” or buy when prices hit the bottom.

Doug Meek, a middle school teacher who also lives in Walnut Creek, is looking for a home for his 62-year-old mother.

Meek said that he was a critic of the housing boom and was sure the market would eventually subside, something he told his family prior to 2004.

“My wife and I just kept saving money and waited for this thing to really get crushed,” he said. “I kept feeling pressure; I had three kids in one room. I had no idea the market would go down this much.”

He and his wife bought in January 2007 when the market was just starting to slow, saying he didn’t time the market correctly, but hopes his mother and his brother who was also looking to buy will.

“We’re basically looking for something where she will be able to sustain her lifestyle,” he said.

He found a townhome in Concord where they made an offer around $200,000 but hasn’t heard from the owner yet. Meek feels a little vindicated, though. A few years ago the “same little condo” was twice the price, he said.

Timing the market isn’t unusual.

According to Stephen Levy, director of the Palo Alto-based Center for the Continuing Study of the California Economy, the early 1990s was another period of declining values in the housing market.

“It’s new over the last 200 years but not new in the past 20 or 30 years,” he said.

People are only concerned about the right time to buy when values may go down, Levy said.

“Previously, there was no timing the market because the price was always going to be higher,” he said.

Levy said that prices are still outstripping wages, a sign of an overvalued market, and to expect additional correction for at least another year. But Levy said that buyers attempting to time the bottom of the market may be disappointed.

“If people had timed the market a year ago, they would have blown that,” he said.

Roger Stone had been looking for three months for a home before signing a contract in February for a $465,400, 3,500-square-foot home in Tanglewood at Live Oak Ranch in Oakley.

“In that three-month period, it continued to change, change, change,” the 46-year-old landscaper and tree-cutter said. “I was actually in contract with another builder to buy another house, but by December the price had changed so much. They were not willing to re-negotiate so I canceled it and walked away.”

The unpredictable market is making buyers more choosy and unlikely to buy anything not considered “a good buy.”

Christopher Thornberg, an economist and founder of Beacon Economics in both Los Angeles and San Rafael, said that timing the housing market is easier than the stock market.

“These are markets that are very long, it’s not like stocks where the price goes up or down erratically,” he said. “Home prices don’t magically rise and fall. When prices haven’t gone down for six months, then you’re good to go.”

Thornberg said that in the short-term, the housing market will be going down, with factors like inflation and recession only lengthening the process.

“If you have the attitude that this is your dream house and you’re willing to take the loss in order to secure this house that you may never have a chance at again, then by all means, buy it,” he said. “But if you’re not that picky, then wait.”